Bush inks law blocking aid to Hamas govt

The "Palestinian Anti-Terrorism Act of 2006," Bush said in a statement, is "designed to promote the development of democratic institutions in areas under the administrative control of the Palestinian Authority."

The law declares it the policy of the United States to avoid any contact with Hamas and other organisations Washington has labeled terrorist until they recognise Israel's right to exist, renounce terrorism, dismantle their militias and recognise and abide by previous agreements and understandings between Israel and the Palestine Liberation Organisation and the Palestinian Authority.

While the text cites aid to the Palestinian Authority, it is targeted at Hamas, which won control of the authority in March 2006 following elections.

It allows aid to continue to activities of Palestinian Authority President Mahmud Abbas, whose Fatah group has been in street battles with Hamas activists for the past two weeks.

Washington wants to push Hamas into accepting Israel's right to exist as a basis for the "roadmap" plan for peace between the two sides.

"This legislation reflects our continued concern over the failure of the current government to renounce violence and terror, recognise Israel, and respect its previous agreements and obligations," said a senior administration official.

However, the official said current assistance programmes to the Palestinian people will not be affected by the law.

Meanwhile, a fierce gunbattle broke out between Hamas and Fatah militants in Gaza City early yesterday, underscoring the fragility of a two-day old truce that had largely ended factional violence there.

The street battle erupted when Hamas militiamen tried to free two kidnapped militants, including a senior member of the Islamic group. It died down after 20 minutes as Muslim clerics and other mediators worked to restore the cease-fire. Nobody was hurt despite the battle's intensity, health officials said.

Meanwhile, Palestinians stepped up rocket attacks on Israel, including one that veered off course and hit a Gaza home, injuring a 2-year-old Palestinian boy sleeping in his bedroom, officials aid.

Six other rockets landed in Israel, but nobody was hurt. The barrage threatened a separate cease-fire between Israel and the Palestinians that ended months of Israeli military activity in the Gaza strip.